Billion-Dollar 'Superproject' Highlights Amendment 82 Bonds

by Michael Stratford, The Associated Press  on Sunday, Jan. 27, 2013 10:55 am  

A "superproject" could benefit from Amendment 82 — a voter-approved funding mechanism that would let the state borrow up to $235 million to cover a company's start-up costs, with the Legislature's approval. Voters in 2004 gave legislators the authority to take on such debt after the state lost a truck manufacturing plant to Texas. (Photo by Stephanie Dunn)

The state began working on a major project about a year ago when the company approached Arkansas and several other states with their plan for a new facility, according to Tennille.

He said that the company considered Arkansas because of, among other things, its geographic location and its manufacturing workforce.

"Our position on the map was highly desirable," he said. "For the kinds of jobs that we're talking about, we've got a ready workforce, particularly with our two-year colleges able to get people the specific skills needed."

To land the plant, many states can offer a number of financial incentives to make themselves more attractive. Arkansas can borrow money with the Legislature's approval and pay it back with either general revenue or a specially-designated source of revenue.

Under Amendment 82, the amount of the bonds is limited to 5 percent of the general revenue the state collected in the previous year. That means that this year legislators could authorize the state to take on up to $235 million in debt for the project.

Tennille declined to say how much financing the Governor would ask the Legislator to approve. When Amendment 82 was being debated, economic officials said a $100 million incentive package amortized over 20 years at 5 percent interest would cost the state about $7 million annually.

Tennille said the state is still negotiating with the company over a proposal and the letter of commitment, both of which are required under the Amendment.

Once those documents are finalized and the state's Economic Development Commission and Development Finance Authority agree to the plan, the Governor will give lawmakers a formal proposal.

The Legislature then has a 20-day window in which it can seek a third-party economic evaluation of the project before voting on the authorization of bonds.

If the Legislature were to decline authorization of the Amendment 82 bonds without finding another way to provide startup funds to the company, the state would likely lose the project, Tennille says.

"There is more than one other state waiting in the wings, and I would predict that the project would be announced very quickly somewhere else," he said.

Legislative leaders said last week that whether they support the project would depend on the specifics of the proposal.

 

 

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